South Africa has just come back from the edge of a serious financial crisis: CEO

 ·22 Nov 2021

The prospect of a serious fiscal crisis in South Africa has diminished, says Business Leadership South Africa (BLSA) chief executive Busi Mavuso.

Writing in her weekly open letter, Mavuso said the country has been teetering since its last investment-grade credit rating in 2019. The debt and revenue trajectories of government appeared out of control and it wasn’t clear that National Treasury would be able to resist demands from all quarters that it keeps spending, she said.

“The problem is that such a risk is self-reinforcing. Because companies’ investment decisions are all about the future, they factor in the possibility of a collapse of the government’s finances. That would inevitably trigger a wider economic crisis, leading to major shocks to all companies.

“A year-and-a-half ago, many businesses would have baulked at making large multi-year commitments to invest. The result was lower economic growth, government revenue and employment.”

However, Mavuso said that National Treasury has largely kept its promise and business is starting to regain trust.

She pointed to the recent medium-term budget policy statement which shows that debt is being brought under control and that Treasury is keeping a firm hand on spending. This is important because the calls for Treasury to open the taps, particularly on welfare spending, have been ‘loud and incessant’, she said.

It has also had to impose wage restraint on a civil service that had become used to real increases annually. Being able to hold the line was an important signal to business that Treasury remains firmly on top of government finances, Mavuso said.

“Ironically, this is critical to embedding a sustainable solution to the welfare needs of large parts of our population. While Treasury could have simply acquiesced to demands for programmes with annual costs ranging from R50 billion to multiples more, that could only have ever been short term. Such demands would have had to be funded and the only choices are higher taxes or more debt.

“Both would have been a serious blow to business confidence, with taxes potentially a serious shock to disposable income in the economy – though somewhat counterbalanced by increased spending from welfare recipients – and increased debt again destabilising government’s financial position. It would have put us back on the road to financial ruin.”


Mavuso said Treasury has been able to improve the fiscal outlook from where we were in February thanks to an unexpected windfall from mining taxes.

This R120 billion in extra collection has enabled it to fund the special Covid grants instituted during the lockdowns to support the most vulnerable, as well as to increase debt repayments.

As a result, the debt outlook foresees the government achieving a primary surplus in 2023/24, which will mark the point at which overall debt levels start to decline. The minerals windfall has been rightly seen as a short-term boon that won’t hold for the long term, she said.

“Economic growth is the only sustainable solution to the poverty facing many in our country. That requires businesses to be confident that the fiscal position is not at risk. Growth has a double impact on poverty: it creates revenue that government can then use to fund enhanced welfare, and it creates jobs that diminish the need for welfare in the first place.

Mavuso said South Africa will start to see the fruits from the recovery in business confidence.

“For example, many companies are preparing multi-billion rand investments in energy generation, an important element for long-term energy security. More will come as Treasury beds down the fiscal outlook. We are also making slow progress toward much wider infrastructure investment, from ports to bulk water.”

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